Japanese action against South Korea spells trouble for region’s electronics supply chains

Japan’s decision to curb exports of some high-tech materials to South Korea could have a significant impact on electronics supply chains, not only in South Korea but also the region, according to DBS Group Research.

The Japanese government on July 1 said that it would curb the exports of high-tech materials to its neighbour. Bilateral diplomatic ties have deteriorated over disputes regarding compensation for South Koreans forced to work for Japanese firms during World War Two. The policy became effective on July 4, with Japan requiring its exporters to seek approval when shipping three types of high-tech materials to South Korea, a process that will take up to 90 days.

The high-tech materials on Japan’s restriction list are crucial for the manufacturing of semiconductors and display screens. Japan dominates global supply of these materials. On the other hand, South Korea plays a key role in the global supply of memory chips and OLED screens.

A shortage or delay in the supply of components could affect downstream electronics producers around the region. Producers in the Thai electronics sector could also become vulnerable.